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Community First CU judge rejects government appeal

GREEN BAY, Wis. (7/16/09)--Saying that none of their arguments suggested “that the jury lacked an evidentiary basis for reaching its verdict,” U.S. District Judge William Griesbach on Tuesday rejected a Department of Justice motion which sought to overturn a recent jury verdict in favor of Community First Credit Union’s challenge against the federal government over the Internal Revenue Service's (IRS) position on credit union unrelated-business income taxation (UBIT). On May 14th, a jury found in favor of the credit union's refund claim of $54,604, the full amount the credit union sought, plus costs. The amount represented taxes paid on credit life and credit disability insurance and guaranteed asset protection (GAP) products. In the July 14 ruling, Griesbach said that the government’s challenge, which asked the court to “reweigh the evidence and find that the jury should have preferred its version of the evidence” to the credit union’s, was “outside the bounds” of what is allowed under Federal Rule 50. Under Federal Rule 50, courts may “grant judgment as a matter of law when a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue.” The government will have 60 days to appeal Griesbach’s ruling. In another pending court case that is relevant to credit unions, Judge Christine M. Arguello has scheduled a five-day jury trial for the case of Bellco Credit Union v. U.S. Colorado-based Bellco filed suit against the government in May seeking a nearly $200,000 refund from the Internal Revenue Service for UBIT taxes paid on accidental death and disability insurance, credit life and disability insurance, and other financial services. Both parties in the tax dispute have filed motions for summary judgment, and no decision has been made yet. The Community First CU decision is not expected to directly affect the proceedings in the Bellco case.